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By Jeremy Alford

BATON ROUGE — A revised plan to address contaminated oilfield sites was tabled by legislators Wednesday before an official vote was taken.

The nearly five-hour debate pitted Louisiana’s oil-and-gas industry against landowners, conservationists and trial lawyers.

Members of the House Natural Resources Committee said they were concerned about passing a bill with immense complexities, while state officials wavered on the question of whether the Louisiana Department of Natural Resources could take the specialized claims process from the courts.

Some lawmakers were upset that Natural Resources refused to take a position on House Bill 563 by Rep. Page Cortez, R-Lafayette.

“Are they capable of doing this job or not? I don’t want to create another layer of bureaucracy with this,” said Rep. Joe Harrison, R-Napoleonville. “I don’t understand that. I’ve never been neutral in my life.”

The Legislature last took up the issue five years ago. They’re called legacy sites because the lawsuits sometimes involve land contaminated by oil companies generations ago.

Such claims are channeled through district courts now, but the oil-and-gas lobby complained that litigation takes too long and there are no guarantees that landowners had to spend the money received to repair the property.

With House Bill 563, oil interests were hoping to give Natural Resources control of the process and shorten the litigation time.

Even though there’s a duplicate measure in the Senate, Gifford Briggs, vice president of the Louisiana Oil and Gas Association, said the issue is probably dead for the session.

“The general consensus is we brought the issue to the committee, and lawmakers have acted,” Briggs said. “At this point it’s highly unlikely that we’ll proceed again.”

Cheron Brylski, a New Orleans-based consultant working with environmentalists and landowners, said she fears the proposed legislation would remove claimants’ right to go to court.

“Big oil and gas hire the best lawyers and lobbyists money can buy,” she said. “They don’t want you to hire any lawyer. Ever. Period.”

David Russell, president of McGowan Working Partners, said he deserves protections, too.

“Obtaining proper insurance … for oilfield operations is not difficult to get,” Russell said. “It’s impossible. After 15 years of providing coverage, my company’s provider declined pollution liability insurance coverage simply due to the legacy-lawsuit issues in the state. Developments like this are going to shut this industry down, as far as Louisiana is concerned.”

Regardless of Wednesday’s outcome, opponents and proponents both agreed the program has faults.

Of the 250 cases recognized by the state, only two have been cleaned up since the latest law went into effect five years ago and another 16 cases are working through the system, according to Natural Resources attorney Blake Canfield.

Original Article

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Written by Steve Maley

From an unrepentant free-market capitalist.

Left to its own devices, the oil industry is its own worst enemy. Relatively low barriers to entry have made the industry freely competitive. The reward goes to the quickest and the most efficient companies; just like in a Gold Rush, we remember the big winners and quickly forget the also-rans. Since the days of Colonel Drake, Patillo Higgins and Dad Joiner, twas ever thus.

The consumer ultimately benefits from a profitable and efficient energy business in the form of affordable and abundant energy supplies. This is because energy is essentially a “grow or die” business. An oil company that does not efficiently replace its production with new reserves is essentially holding a “going out of business sale” with every barrel of oil it produces.

The effort to replace reserves is funded out of profits.To hear the press or Leftist politicians speak, you would think that oil industry profits are a problem, a problem that desperately needs a government solution (read: higher taxes).

The popular notion seems to be that oil companies see the accumulation of profit as an end in itself. They imagine ExxonMobil executives at play in a Money Pit of filthy lucre reminiscent of Scrooge McDuck’s:

In fact, oil company profits are mostly used for two things:

1. Capital investment to replace reserves.
2. Paying dividends to the owners. Who owns oil companies? Executives own 1.5%. The remainder is owned by, well, you and me:

Ninety-three percent of domestic wells are drilled by “independents”, the smaller non-integrated companies represented by the Independent Petroleum Association of America (IPAA). Smaller companies are less inclined to pay a large dividend; IPAA studies suggest that independents typically reinvest 125 to 150% of their profits (net income) in an effort to grow.

The best current example of this free market dynamic in action is in the active shale gas plays across the country. Success of new technologies has led to a glut of natural gas on the market; for the consumer, this means plentiful supplies of gas, and stable prices in the range of $4.00 to $4.50 per million BTU, about a quarter of the current cost of an oil BTU. Many observers consider the current market prices of gas lower than the average cost of finding and developing that gas, suggesting a long-term unsustainable business model for the “average” company. Ultimately, the survivors will be the companies who can be significantly better than the average, through better efficiency, better technology or better business savvy.

The consumer gets gas at the lowest possible price because capital, presuming higher future prices, oversupplied the market. Supply goes up, prices come down. Econ 101.

One would think that if a market were prone to manipulation and control, the natural gas market would be an easier target than the oil market. For starters, it’s smaller and it’s almost completely domestic. “Big Oil” has a significant stake in natural gas, too; ExxonMobil’s recent $41 billion bet on natural gas has yet to pay off, and would benefit handsomely from higher gas prices. How is it that crafty XOM can manipulate the international oil market but not the domestic natural gas market?

The free market is the answer.

We’ve tried the government-centric route before. In the 1970s, Arab oil embargoes led to Nixon’s price controls and Carter’s Natural Gas Policy Act of 1978 and Windfall Profits Tax. Ironically, the biggest sustained “boom” I have experienced during my 33 year career was during 1978-1981, smack in the middle of the Carter years, when oil companies were government’s enemy and the energy crisis was “the moral equivalent of war“. It was only after President Reagan ended oil price controls and reformed the tax code that oil prices collapsed, to stay low for a generation.

The free market is the answer.

We have let our domestic oil supply situation deteriorate. The highest-potential prospective areas for new exploration are off limits. International oil trading is conducted in the ever-eroding U.S. dollar, which creates upward pressure on the oil price to keep our foreign suppliers whole. President Obama and the Senate have identified the profitability of five private companies (BP, Shell, ExxonMobil, ConocoPhillips and Chevron) as the problem. These companies have large profits, not because their profit margins are outrageous, but because they are huge companies. Increasing their tax liability will only discourage their reinvestment. Meanwhile, state-owned enterprises like Aramco (Saudi Arabia), Citgo (PdVSA – Venezuela), CNOOC (China) and Petrobras (significant ownership by Brazil) are allowed to operate freely in our markets, unaccountable to anyone other than their autocrats and oligarchs for their profitability.

Am I missing something?

Cross-posted at SteveMaley.com.

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By Advocate staff report

The House Natural Resources and Environment Committee voted Wednesday to defer considering an industry-backed bill to change the way the state handles disputes over cleaning up land contaminated by oil and gas wells.

Louisiana Oil and Gas Association President Don Briggs said in a prepared statement that existing state law allows plaintiff attorneys to make “wildly inflated” environmental claims designed to force settlements.

Those claims are hurting independent oil and gas producers, and the lawsuits languish for years while nothing is done about the environmental damage that may exist, Briggs said.

Critics of the proposed legislation claim the bill illegally strips landowners of their property rights and would apply retroactively to contamination claims.

The legislative calendar allows about five weeks for further action, according to LOGA.

Original Article

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By Bill Barrow

The old fault line between big business and the plaintiffs bar revealed itself again Wednesday, with Louisiana’s largest landowners going against the world’s largest oil and gas firms over how to settle environmental damage claims related to oilfields.

In a victory for the landowners and their lawyers, the House Natural Resources Committee rejected a measure that would have stripped primary jurisdiction over the lawsuits from local courts and given it to the Louisiana Department of Natural Resources. Republicans and Democrats fell on both sides of the 10-7 vote, which followed hours of debate witnessed by several of the state’s most influential contract lobbyists.

Oil and gas representatives told lawmakers that House Bill 563 by Rep. Page Cortez, R-Lafayette, is a way to expedite clean-ups of oil fields that are now the subject of protracted “legacy lawsuits,” so-called for the alleged legacy of contamination wrought by years of production on a site. Supporters also said the history of the suits, the 250 or so pending claims across the state and the threat of new torts hamper their business.

David Russell of McGowan Working Partners, an oil producer, told legislators he is unable to secure environmental liability insurance. Scott Sinclair of Tensas Delta Exploration said his firm has had to hold back on capital investments.

Opponents of the bill, lead by Jimmy Faircloth, a former executive counsel to Republican Gov. Bobby Jindal, framed the Cortez bill as a way to shield oil and gas firms from liability.

“Any time you have an industry say they want more regulatory involvement in their operations, you really ought to think about what that means,” said Faircloth, who was representing the Roy O. Martin Lumber Co. and others he said combine to own hundreds of thousands of acres.

The debate concerned changes to a 2006 law — called Act 312 — that governs legacy lawsuits. The law was one of a handful of legislative actions responding to a Louisiana Supreme Court decision — Corbello v. Iowa Production — that essentially held that damages awarded to a landowner for oilfield surface damage did not have to be tied to the land’s value and that the landowner was not required to use the settlement payments to clean up the effects of the damage.

Among several provisions, Act 312 has brought the Department of Natural Resources into the legacy lawsuits to help prepare clean-up plans — assigning liability and cost — as part of the suits, which typically are filed in the judicial district where the oilfield is at issue. Current law allows judges to review the clean-up plans.

Cortez emphasized the testimony of DNR officials who said that of 248 suits filed since Act 312 became law, only two fields are completely clean, while only 65 or so have even completed environmental testing to gauge damage.

The Cortez bill essentially would have pushed the formulation of a clean-up plan to the front of the legal process, once a firm admitted responsibility. Any challenge to the clean-up plans would have to be brought in the 19th Judicial District based in Baton Rouge. That is the court that handles all claims stemming from the administrative regulations of state executive agencies. The change would not have barred a landowner from filing an action in a local district court, but a firm’s admission of liability for cleanup would not have been admissible in the subsequent private claim.

Russell, representing the McGowan firm, did not dispute that the act could help him in those cases. “I’d feel much better walking into court with a plan from Natural Resources” settling the cost of clean-up.

Faircloth seized on that testimony, saying the firms, from Exxon and Shell to independent firms, “would be more comfortable” dealing with state regulators and district judges in the capital “than with the judges and juries” around Louisiana.

Under questioning from Committee Chairman Gordon Dove, Faircloth conceded that the clean-up process has been slow for the past five years. But he said blame is misplaced: “I think talented lawyers from both sides have learned how to work it.”

Original Article

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A 2006 Louisiana state law has resulted in oil companies paying millions of dollars in litigation for damages done to properties worth half that much have created “a tremendous burden” on the industry, oil executives claim.

Speaking at a press conference in Baton Rouge on May 11, Louisiana Oil and Gas Association President Don Briggs said he supports new legislation that will give state and local officials over oil spill cleanups.

Briggs pointed to a 2003 lawsuit where the plaintiff was awarded $54 million for oil contamination to land worth just over $100,000. The plaintiff had leased the land to oil companies to aid in offshore drilling.

State Rep. Page Cortez (R-Lafayette) has introduced legislation that will amend Act 312, which allowed local courts to place fault when it came to oil contamination before a cleanup plan was put in place.

The new legislation would make it so state officials would have authority over cleanup and would determine a cost before a ruling is determined in litigation.

Briggs said lawsuits stemming from “legacy sites” – where landowners lease land to oil companies for drilling – can last for several years and hinder growth in the industry.

In an editorial written for the Record and which also appeared in the Lafourche Parish Daily Comet, Louisiana Lawsuit Abuse Watch (LLAW) Director Melissa Landry was critical of “legacy” lawsuits.

The lawsuits, Landry wrote, “are supposed to help clean up the environment from damage that may have occurred years or decades ago.”

“But the only real impact they’re having is slowing down oil production at a time when we need it most,” she wrote. “According to the state’s independent oil producers association, this is largely due to the fact that our existing laws make Louisiana very attractive to some personal injury lawyers and a great place to play the legacy lawsuit “lottery.”"

U.S. Senator David Vitter (R-La.) has backed the new state legislation seeking to curb “legacy” suits. In a statement, he said he’s “very concerned” with how the lawsuits cound hinder the energy industry in Louisiana.

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The Haynesville Shale has given Desoto parish a decided advantage over other school districts in Louisiana.  The millions of dollars generated by the shale have been used for upgrades to facilities, technology and supplemental pay for all school system employees.

“What the Haynesville Shale has done, from my viewpoint, those who have had watch over the money in the past and did a great job of it, we can not utilize this shale money to do what we couldn’t before,” said Sedric Clark, principal at Mansfield High school.

Next fall all schools in Desoto will part of the Teacher Advancement Program.  It provides teachers with professional development on campus.  Designated master teachers at each school identify learning strategies that meet the needs of students.  Those strategies are then taught to the other teachers and then implemented in the classroom.  “It narrows their focus and it puts everyone on the same train and it keeps you all moving in the right direction to increase student achievement as well as improve teacher quality,” said Deania McMillan, master teacher at North Desoto middle school.

The shale has also allowed the district to speed along it’s technology program.  “The Haynesville Shale structure has allowed us to move a little quicker into putting these pieces of the plan together for our schools and our teachers and our students,” Cathy Noel said.

Each instructional classroom is equipped with six computers and a smartboard.  Next fall, each school will be outfitted with fiber optics and all high schools will utilize the iPad and use e-textbooks in the classroom.

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President Barack Obama Saturday announced plans to expand domestic oil production, including holding a lease sale in the Gulf of Mexico this year and two in 2012, and extending leases in the Gulf that were affected by the drilling moratorium in the wake of the BP oil spill to allow operators more time to meet heightened safety requirements.

In his weekly radio address, the president also said he was directing the Department of Interior to hold annual lease sales in Alaska’s National Petroleum Reserve and to speed up the evaluation of potential oil and gas resources in the mid- and south-Atlantic and to develop new incentives for industry to tap unused leases on and offshore.

As part of a three-step approach to rising gas prices, Obama also called for “rooting out cases of fraud or manipulation in the markets that might affect gas prices, including any illegal activity by traders and speculators,” and ending tax incentives and deductions for the Big Five oil companies

“The American people shouldn’t be subsidizing oil companies at a time when they’re making near-record profits,” the president said. “Next week, there is a vote in Congress to end these oil company giveaways once and for all. And I hope Democrats and Republicans come together and get this done.”

Supporting both fronts

In his address, Obama was essentially attempting to occupy the middle ground between congressional Republicans and Democrats.

In recent days, House Republicans have passed three bills to expedite and expand offshore drilling, which Democratic leaders have said will do nothing to drop the price at the pump. This coming week, the Senate will take up Democratic legislation to end tax breaks for Big Oil, a move that Republicans have said would do nothing to lower gas prices.

Obama suggested that the nation proceed on both fronts.

“Without a doubt, one of the biggest burdens over the last few months has been the price of gasoline. In many places, gas is now more than $4 a gallon, meaning that you could be paying more than $60 to fill up your tank,” he said. “These spikes in gas prices are often temporary — and while there are no quick fixes to the problem, there are a few steps we should take that make good sense.”

The steps Obama announced to increase production fell well short of what the House-passed bills would require, but the administration contends that the Republican program might force officials to act precipitously in issuing permits or conducting lease sales.

Even before Saturday, the administration had said it would hold the three Gulf lease sales, which were postponed by the BP disaster, by the middle of next year. The House bills would require they all be held this year. Obama said one will take place this year.

Political praise, skepticism

The president’s radio address was a clear gesture in the direction of reactivating a drilling agenda a little more than a year after the BP spill began. It won some cautious praise from critics, including Sen. Mary Landrieu, D-La., who has been among the administration’s severest critics on drilling issues.

“It’s very encouraging to see the president pick up where he left off before the oil spill by expanding domestic production. That is exactly what we need to increase supply and create jobs,” Landrieu said. “I’m also encouraged that this administration is finally going to grant lease extensions to the leases in the Gulf affected by the moratorium.”

But, she added, “drilling permits are still slow in coming. I urge the president to push his team to speed up the process.”

Sen. David Vitter, R-La., dismissed the president’s moves as more tactical than meaningful.

“I’m afraid this will be all show and little or no substance,” Vitter said. “He’s clearly reacting to the price at the pump and trying to pre-empt and block our much bolder efforts in Congress as his election approaches. We all just need to keep pushing very hard — keep the pressure up.”

A spokesman for House Speaker John Boehner, R-Ohio, described Obama’s initiatives as “not terribly substantial,” but said that “the president just conceded what his party on Capitol Hill still denies: More American energy production will lower costs and create jobs.”

Industry takes heart

Industry representatives also took heart at what they considered, at the very least, to be a shift in the administration’s tone.

“Today marks the first time that the president has explicitly recognized that responsible permitting in the Gulf is part of a strategy designed to address consumer concerns at the pump,” said Jim Noe, executive director of the Shallow Water Energy Security Coalition.

“If administration policy proceeds along these lines, this is great news for the men and women who work in the Gulf, and for all Americans that need safe, affordable, reliable and clean energy supplies.”

But, he said, “the devil is in the details.”

“We hope that these proposals are only the first in a series toward a more robust national energy plan,” said Erik Milito of the American Petroleum Institute.

Environmentalists worried

By also continuing to zero in on oil industry profits and market speculators, and renewing his call for renewable energy, Obama made sure he would not rile most Democrats on Capitol Hill.

House Democratic Leader Nancy Pelosi, D-Calif., described the president’s remarks as consistent with the House Democratic playbook on energy.

But some environmentalists worried about the renewed reliance on drilling.

“We understand why the president and the American people are concerned about the high price for oil and gas, but the best way to lower those prices and the cost to families over time is to transition this country off oil,” said Anna Aurilio, director of the Washington office of Environment America. “Testing for oil and potentially drilling off our Atlantic coasts and beaches isn’t going to solve our problems. We already know where offshore drilling leads.”

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